Value Pricing: Q & A

I gave a Webinar recently for LawAsia titled “ Why agreeing your fees up front is easier than you think” for over 150 participants which again evidences the increasing interest by firms and their clients to non time based pricing. There were several questions asked at the end of the webinar some of which I addressed but given the time limitations I did not get to answer all the queries raised so over the coming weeks I will address those questions plus several more of the more commonly raised questions I find whenever value based pricing is discussed and intended to be implemented.

So here is today’s question:

What is your view on dual pricing – differentiating between segments like small/large organizations and local/multinational clients? Does it make business sense or is it too risky? If you go in low to secure work can you up the rates or your prices later?

I do not subscribe to any dual pricing strategy. One of the key underlying principles of value based pricing is that you price each client and each matter differently. You are providing each individual client with a unique value proposition which caters specifically to their wants and needs at the time.

Value, like beauty is subjective and in the eye of the beholder. Different clients would value the same thing differently just as the same client would value different things you do for them differently.We have to learn to value and price our clients – not our area of work or our seniority in the firm as hourly rates do.

Yes it does make good business sense to have different prices for different clients and to price your services up front – just like most of your clients do with their customers and you do when you are purchasing the services of someone else.Anchor

In relation to risk, provided you maintain communication with your client (agree to scope and price before you do the work and address scope creep) and provide them with the value you have previously mutually agree to, risk can be minimised. And from your clients point of view – there is far less risk in agreeing to an upfront fee than there is agreeing to an hourly rate (even if the hourly rate comes with an estimate).

No matter what pricing model you use (even hourly rates) going in low to secure  work with the view of increasing your price or rates over time is a very risky business model and rarely – if ever – works. Your clients will be “anchored” to the low or discounted price which soon becomes the ‘norm’ in the eyes of your clients and anything else higher than this (even your normal prices) can look unjustified in comparison.

Rather than looking at lower prices to secure work, work hard on coming up with incredible value and benefits you can and will provide to that client that your competition cannot or may not have thought of. If you do that and communicate the value you are providing to your client your price will tend to look after itself.